Norsat International Inc (USA) (NYSEMKT:NSAT) is a Canada-based satellite communications company and, with an acquirer’s multiple of 7.36, a member of the Small and Micro Cap Screener.
Norsat’s business units include microwave products; satellite terminals, including portable satellite systems; Sinclair Division, through which Norsat provides industry leading antenna and RF conditioning products, engineered systems and project specific design; Maritime Satellite Systems, and Remote Networks, providing end-to-end satellite-enabled network solutions for broadband access and voice, data and video communication services. Norsat also provides engineering consulting.
Its key customers include NATO, the United States Department of Defense, Marine Corps, Army, Navy and Air Force; FOX News, CBS News; Boeing, Reuters, Motorola, TESSCO, and General Dynamics. The company is headquartered in Vancouver, Canada and maintains a presence in the United States, the United Kingdom and Switzerland.
NSAT is cheap. In addition to itsacquirer’s multiple of 7.36, it trades for less than 10 times earnings, and generates OCF and FCF/EV yields of 18 and 16 percent respectively. It’s also buying back stock, so it ticks many of the boxes for me.
The Alternative Activist has a post about the reasons Privet Fund, an activist, has recently taken a position in NSAT (NII as it trades in Canada):
As micro-caps can be considerably riskier, it appears the activist finds a margin of safety in clean balance sheets with net cash positions, free-cash-flow positive (or near break-even) and beaten down valuations, which brings us to Norsat…
- I dig Norsat’s clean balance sheet, minimal debt and low capex investments
- Its gross margins are decent for a comms equipment provider, though it admirably manages its opex for strong net income margins. Also like the positive free-cash-flow margins as well as the respectable return on invested capital.
- Valuation metrics are beaten down. Look at that P/E ratio of 5.7x!
- Though this is only Privet’s 5th largest investment made, given the smaller market cap of NII, Privet owns 15.0% of the shares outstanding.
- Technology-focused activist targets, and more specifically the comms equipment subset of tech, are acquired at a higher rate than the rest of the field (38% vs. the 27% for the whole activist database).